Document



	Three Months Ended						Nine Months Ended
	September 27, 2019			September 28, 2018			September 27, 2019			September 28, 2018
Net sales	$	743.7		$	799.9		$	2,357.6		$	2,380.7
Cost of sales	419.4			433.5			1,309.3			1,272.8
Gross profit	324.3			366.4			1,048.3			1,107.9

Selling, general and administrative expenses	205.7			193.4			661.8			594.5
Research and development expenses	103.1			86.1			268.0			260.7
Restructuring charges, net	7.2			14.8			11.2			101.8
Non-restructuring impairment charges	—			2.0			113.5			2.0
Loss on divestiture	—			0.6			—			0.6
Operating income (loss)	8.3			69.5			(6.2		)	148.3

Interest expense	(77.6		)	(93.6		)	(231.8		)	(280.1		)
Interest income	2.9			2.0			6.6			6.6
Other income, net	37.9			13.4			128.6			17.8
Loss from continuing operations before income taxes	(28.5		)	(8.7		)	(102.8		)	(107.4		)

Income tax benefit	(27.6		)	(122.9		)	(256.6		)	(203.9		)
(Loss) income from continuing operations	(0.9		)	114.2			153.8			96.5

(Loss) income from discontinued operations, net of income taxes	(0.2		)	(0.4		)	6.8			14.9

Net (loss) income	$	(1.1	)	$	113.8		$	160.6		$	111.4

Basic earnings per share (Note 7):
(Loss) income from continuing operations	$	(0.01	)	$	1.37		$	1.84		$	1.15
(Loss) income from discontinued operations	—			—			0.08			0.18
Net (loss) income	$	(0.01	)	$	1.37		$	1.92		$	1.32

Basic weighted-average shares outstanding	84.0			83.2			83.8			84.2

Diluted earnings per share (Note 7):
(Loss) income from continuing operations	$	(0.01	)	$	1.34		$	1.83		$	1.13
(Loss) income from discontinued operations	—			—			0.08			0.17
Net (loss) income	$	(0.01	)	$	1.34		$	1.91		$	1.31

Diluted weighted-average shares outstanding	84.0			85.0			84.2			85.2



	September 27, 2019			December 28, 2018
Assets
Current Assets:
Cash and cash equivalents	$	498.8		$	348.9
Accounts receivable, less allowance for doubtful accounts of $4.5 and $5.0	538.8			623.3
Inventories	325.5			322.3
Prepaid expenses and other current assets	122.2			132.7
Assets held for sale	175.9			—
Total current assets	1,661.2			1,427.2
Property, plant and equipment, net	894.7			982.0
Intangible assets, net	7,496.1			8,282.8
Other assets	304.1			185.3
Total Assets	$	10,356.1		$	10,877.3

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	716.1		$	22.4
Accounts payable	100.9			147.5
Accrued payroll and payroll-related costs	83.7			124.0
Accrued interest	90.9			77.6
Accrued and other current liabilities	506.5			572.2
Liabilities held for sale	55.8			—
Total current liabilities	1,553.9			943.7
Long-term debt	5,048.7			6,069.2
Pension and postretirement benefits	58.6			60.5
Environmental liabilities	60.3			59.7
Deferred income taxes	22.0			324.3
Other income tax liabilities	253.5			228.0
Other liabilities	278.7			304.6
Total Liabilities	7,275.7			7,990.0
Shareholders' Equity:
Preferred shares, $0.20 par value, 500,000,000 authorized; none issued and outstanding	—			—
Ordinary A shares, €1.00 par value, 40,000 authorized; none issued and outstanding	—			—
Ordinary shares, $0.20 par value, 500,000,000 authorized; 93,427,563 and 92,705,747 issued; 84,078,103 and 83,323,877 outstanding	18.7			18.5
Ordinary shares held in treasury at cost, 9,349,460 and 9,381,870	(1,615.6		)	(1,617.4		)
Additional paid-in capital	5,559.2			5,528.2
Retained deficit	(859.8		)	(1,017.7		)
Accumulated other comprehensive loss	(22.1		)	(24.3		)
Total Shareholders' Equity	3,080.4			2,887.3
Total Liabilities and Shareholders' Equity	$	10,356.1		$	10,877.3



	Nine Months Ended
	September 27, 2019			September 28, 2018
Cash Flows From Operating Activities:
Net income	$	160.6		$	111.4
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization	723.5			597.0
Share-based compensation	30.6			27.9
Deferred income taxes	(301.9		)	(232.7		)
Non-cash impairment charges	113.5			2.0
Loss on divestiture	—			0.6
Gain on repurchase of debt	(98.6		)	(6.5		)
Other non-cash items	(31.7		)	2.8
Changes in assets and liabilities, net of the effects of acquisitions:
Accounts receivable, net	68.7			(59.0		)
Inventories	(32.0		)	43.1
Accounts payable	(27.8		)	(0.1		)
Income taxes	17.2			16.7
Other	(88.0		)	(22.1		)
Net cash from operating activities	534.1			481.1
Cash Flows From Investing Activities:
Capital expenditures	(108.7		)	(93.3		)
Acquisitions, net of cash	—			(699.9		)
Proceeds from divestitures, net of cash	—			313.2
Other	13.7			28.8
Net cash from investing activities	(95.0		)	(451.2		)
Cash Flows From Financing Activities:
Issuance of external debt	695.0			657.2
Repayment of external debt	(940.1		)	(1,563.4		)
Debt financing costs	—			(12.0		)
Proceeds from exercise of share options	0.5			1.0
Repurchase of shares	(2.5		)	(57.4		)
Other	(18.1		)	(24.3		)
Net cash from financing activities	(265.2		)	(998.9		)
Effect of currency rate changes on cash	0.5			(0.9		)
Net change in cash, cash equivalents and restricted cash, including cash classified within assets held for sale	174.4			(969.9		)
Less: Net change in cash classified within assets held for sale	(15.1		)	—
Net change in cash, cash equivalents and restricted cash	159.3			(969.9		)
Cash, cash equivalents and restricted cash at beginning of period	367.5			1,279.1
Cash, cash equivalents and restricted cash at end of period	$	526.8		$	309.2

Cash and cash equivalents at end of period	$	498.8		$	290.7
Restricted cash included in other assets at end of period	28.0			18.5
Cash, cash equivalents and restricted cash at end of period	$	526.8		$	309.2



	Ordinary Shares			Treasury Shares					Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Total Shareholders' Equity
	Number	Par Value		Number		Amount			Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Total Shareholders' Equity
Balance as of December 28, 2018	92.7	$	18.5	9.4		$	(1,617.4	)	$	5,528.2		$	(1,017.7	)	$	(24.3	)	$	2,887.3
Impact of accounting standard adoptions, net of tax	—	—		—		—			—			(0.5		)	0.5			—
Net income	—	—		—		—			—			154.9			—			154.9
Currency translation adjustments	—	—		—		—			—			—			1.4			1.4
Change in derivatives, net of tax	—	—		—		—			—			—			0.2			0.2
Change in benefit plans, net of tax	—	—		—		—			—			—			(0.3		)	(0.3		)
Share options exercised	—	—		—		—			0.3			—			—			0.3
Vesting of restricted shares	0.2	0.1		—		(0.5		)	—			—			—			(0.4		)
Share-based compensation	—	—		—		—			10.0			—			—			10.0
Reissuance of treasury shares	—	—		—		0.9			—			(0.4		)	—			0.5
Balance as of March 29, 2019	92.9	$	18.6	9.4		$	(1,617.0	)	$	5,538.5		$	(863.7	)	$	(22.5	)	$	3,053.9
Net income	—	—		—		—			—			6.8			—			6.8
Currency translation adjustments	—	—		—		—			—			—			2.3			2.3
Change in derivatives, net of tax	—	—		—		—			—			—			0.5			0.5
Change in benefit plans, net of tax	—	—		—		—			—			—			(0.4		)	(0.4		)
Share options exercised	—	—		—		—			0.2			—			—			0.2
Vesting of restricted shares	0.4	0.1		0.1		(2.0		)	—			—			—			(1.9		)
Share-based compensation	—	—		—		—			12.8			—			—			12.8
Reissuance of treasury shares	—	—		(0.1	)	1.6			—			(0.6		)	—			1.0
Balance as of June 28, 2019	93.3	$	18.7	9.4		$	(1,617.4	)	$	5,551.5		$	(857.5	)	$	(20.1	)	$	3,075.2
Net loss	—	—		—		—			—			(1.1		)	—			(1.1		)
Currency translation adjustments	—	—		—		—			—			—			(2.1		)	(2.1		)
Change in derivatives, net of tax	—	—		—		—			—			—			0.3			0.3
Change in benefit plans, net of tax	—	—		—		—			—			—			(0.2		)	(0.2		)
Vesting of restricted shares	0.1	—		—		—			(0.1		)	—			—			(0.1		)
Share-based compensation	—	—		—		—			7.8			—			—			7.8
Reissuance of treasury shares	—	—		(0.1	)	1.8			—			(1.2		)	—			0.6
Balance as of September 27, 2019	93.4	$	18.7	9.3		$	(1,615.6	)	$	5,559.2		$	(859.8	)	$	(22.1	)	$	3,080.4



	Ordinary Shares			Treasury Shares					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders' Equity
	Number	Par Value		Number		Amount			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders' Equity
Balance as of December 29, 2017	92.2	$	18.4	5.9		$	(1,564.7	)	$	5,492.6		$	2,588.6		$	(12.9	)	$	6,522.0
Impact of accounting standard adoptions, net of tax	—	—		—		—			—			2.6			(1.5		)	1.1
Net loss	—	—		—		—			—			(18.0		)	—			(18.0		)
Currency translation adjustments	—	—		—		—			—			—			(2.3		)	(2.3		)
Change in derivatives, net of tax	—	—		—		—			—			—			0.4			0.4
Change in benefit plans, net of tax	—	—		—		—			—			—			(0.5		)	(0.5		)
Vesting of restricted shares	0.3	0.1		—		(1.4		)	—			—			—			(1.3		)
Share-based compensation	—	—		—		—			4.6			—			—			4.6
Reissuance of treasury shares	—	—		—		0.8			—			(0.3		)	—			0.5
Repurchase of shares	—	—		2.9		(45.2		)	—			—			—			(45.2		)
Balance as of March 30, 2018	92.5	$	18.5	8.8		$	(1,610.5	)	$	5,497.2		$	2,572.9		$	(16.8	)	$	6,461.3
Net income	—	—		—		—			—			15.6			—			15.6
Currency translation adjustments	—	—		—		—			—			—			(5.0		)	(5.0		)
Change in derivatives, net of tax	—	—		—		—			—			—			0.1			0.1
Vesting of restricted shares	—	—		0.1		(0.2		)	(0.1		)	—			—			(0.3		)
Share-based compensation	—	—		—		—			11.8			—			—			11.8
Reissuance of treasury shares	—	—		(0.1	)	1.6			—			(0.7		)	—			0.9
Repurchase of shares	—	—		0.7		(10.0		)	—			—			—			(10.0		)
Balance as of June 29, 2018	92.5	$	18.5	9.5		$	(1,619.1	)	$	5,508.9		$	2,587.8		$	(21.7	)	$	6,474.4
Net income	—	—		—		—			—			113.8			—			113.8
Currency translation adjustments	—	—		—		—			—			—			3.2			3.2
Change in derivatives, net of tax	—	—		—		—			—			—			0.2			0.2
Change in benefit plans, net of tax	—	—		—		—			—			—			(0.4		)	(0.4		)
Vesting of restricted shares	0.2	—		—		(0.6		)	0.9			—			—			0.3
Share-based compensation	—	—		—		—			11.5			—			—			11.5
Reissuance of treasury shares	—	—		(0.1	)	1.2			—			(0.6		)	—			0.6
Balance as of September 28, 2018	92.7	$	18.5	9.4		$	(1,618.5	)	$	5,521.3		$	2,701.0		$	(18.7	)	$	6,603.6

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs and involve risks, uncertainties and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 28, 2018, filed with the United States ("U.S.") Securities and Exchange Commission ("SEC") on February 26, 2019.

We own or have rights to use the trademarks and trade names that we use in conjunction with the operation of our business. One of the more important trademarks that we own or have rights to use that appears in this Quarterly Report on Form 10-Q is "Mallinckrodt," which is a registered trademark or the subject of pending trademark applications in the U.S. and other jurisdictions. Solely for convenience, we only use the ™ or ^® symbols the first time any trademark or trade name is mentioned in the following discussion. Such references are not intended to indicate in any way that we will not assert, to the fullest extent permitted under applicable law, our rights to our trademarks and trade names. Each trademark or trade name of any other company appearing in the following discussion is, to our knowledge, owned by such other company.

Beginning in the first quarter through the third quarter of fiscal 2018, the historical financial results attributable to "the Specialty Generics Disposal Group" were reflected in our interim unaudited condensed consolidated financial statements as discontinued operations. As a result of the December 6, 2018 spin-off announcement of the Specialty Generics business, the Specialty Generics Disposal Group no longer met the requirements to be classified as held for sale, and the historical financial results attributable to the Specialty Generics Disposal Group were recast as continuing operations in our Annual Report on Form 10-K for the fiscal year ended December 28, 2018, as well as the unaudited condensed consolidated financial statements for the prior periods as presented herein.

On August 5, 2019, the Internal Revenue Service ("IRS") proposed an adjustment to the taxable income of Mallinckrodt Hospital Products Inc. (“MHP”) as a result of its findings in the audit of MHP’s tax year ended September 26, 2014. MHP, formerly known as Cadence Pharmaceuticals, Inc. (“Cadence”), was acquired as a U.S. subsidiary on March 19, 2014. Following the acquisition of Cadence, we transferred certain rights and risks in Ofirmev^® intellectual property (“Transferred IP”) to one of our wholly owned non-U.S. subsidiaries. The transfer occurred at a price (“Transfer Price”) determined in conjunction with our external advisors, in accordance with applicable Treasury Regulations and with reference to the $1,329.0 million taxable consideration we paid to the shareholders of Cadence. The IRS asserts the value of the Transferred IP exceeds the value of the acquired Cadence shares and, further, partially disallows our control premium subtraction. The proposed adjustment to taxable income of $871.0 million, excluding potential associated interest and penalties, is proposed as a multi-year adjustment and may result in a non-cash reduction of our U.S. Federal net operating loss carryforward of $849.3 million. We strongly disagree with the proposed increase to the Transfer Price and intend to contest it through all available administrative and judicial remedies, which may take a number of years to conclude. The final outcome cannot be reasonably quantified at this time, however, the proposed adjustment may be material. We believe our reserve for income tax contingencies is adequate.

In May 2019, we filed a lawsuit in federal district court against the U.S. Department of Health and Human Services ("HHS") and Centers for Medicare & Medicaid Services ("CMS" and together with HHS, the "Agency"). This lawsuit is in response to a decision by CMS to require that we revert to the original base date average manufacturer price (“AMP”) used to calculate Medicaid drug rebates for Acthar^® Gel(repository corticotropin injection) ("Acthar Gel"), which has the practical effect of imposing a prospective reduction in Acthar Gel net sales of $90.0 million to $100.0 million, which corresponds with the approximate amount of annualized Medicaid net sales for Acthar Gel. While we believe that our lawsuit has strong factual and legal bases, as of September 27, 2019, the potential for retroactive non-recurring charges could range from zero to approximately $600.0 million. This matter is further described in Note 15 to the unaudited condensed consolidated financial statements.

During the nine months ended September 27, 2019, we completed a reorganization of our intercompany financing and associated legal entity ownership in response to the changing global tax environment. As a result, during the nine months ended September 27, 2019, we recognized current income tax expense of $28.9 million and a deferred income tax benefit of $215.7 million with a corresponding reduction to net deferred tax liabilities. The reduction in net deferred tax liabilities was comprised of a decrease in interest-bearing deferred tax obligations, which resulted in the elimination of the December 28, 2018 balance of $227.5 million, a $35.4 million increase to a deferred tax asset related to excess interest carryforwards, a $26.4 million increase in various other net deferred tax liabilities and a $20.8 million decrease to a deferred tax asset related to tax loss and credit carryforwards net of valuation allowances. The elimination of the interest-bearing deferred tax obligation also eliminated the annual Internal Revenue Code section 453A interest expense.

VTS-270 is our development product to treat Niemann-Pick Type C, a complicated, ultra-rare neurodegenerative disease that typically presents in childhood and is ultimately fatal. The results of our completed registration trial for the product did not show a statistically significant separation from placebo. Neither the VTS-270 nor the placebo arm showed disease progression as would be expected for a neurodegenerative condition over 52 weeks of observation. The U.S. Food and Drug Administration ("FDA") indicated to us at a Type A meeting in August 2018 that their view on the potential approvability will be based on the totality of data, not a single study or endpoint. Accordingly, our review of the data from the Phase 2b/3 trial, including the longer term open label portion, continues to proceed and is being assessed in combination with several other available data sources. A better understanding of the potential benefit of VTS-270 will emerge as we carefully consider the totality of data available and continue to work with the primary investigators and the FDA to define a viable path to a new drug application (NDA). We will continue to assess the impact of any

On September 30, 2019, we announced that Mallinckrodt plc, along with its wholly owned subsidiaries Mallinckrodt LLC and SpecGx LLC, had executed a definitive settlement agreement and release with Cuyahoga and Summit Counties in Ohio in connection with lawsuits pending in multidistrict opioid litigation ("MDL") in the U.S. District Court for the Northern District of Ohio ("Track 1 Cases"). The settlement fully resolves the Track 1 Cases against all named Mallinckrodt entities that were scheduled to go to trial in October 2019 in the MDL. The Track 1 Cases assert various claims related to the opioid business operated by SpecGx LLC. Under the agreement, we paid $24.0 million in cash on October 1, 2019. In addition, we will provide $6.0 million in generic products, including addiction treatment products, and will also provide a $0.5 million payment in two years in recognition of the counties' time and expenses. Further, in the event of a comprehensive resolution of government-related opioid claims, we have agreed that the two plaintiff counties will receive the value they would have received under such a resolution, less the payments described above. All named Mallinckrodt entities were dismissed with prejudice from the lawsuit. The value of the settlement should not be extrapolated to any other opioid-related cases or claims.

As of the date of this report, we have been in preliminary discussions with certain plaintiffs in other pending opioid lawsuits and are likely to have further discussions and/or enter into additional discussions with other parties in connection with opioid lawsuits. We may be required to pay material amounts and/or incur other material obligations as a result of any settlements that are entered into as a result of such discussions, but we are unable to predict outcomes or estimate a range of reasonably possible losses at this stage. Further, such matters or the resolution thereof, whether through judicial process or settlement or otherwise, may make it necessary or advisable for us and/or one or more of our subsidiaries to seek to restructure our or their obligations in a bankruptcy proceeding. We are exploring a wide array of such potential outcomes as part of our contingency planning, including the impact such actions could have on our business and operations. Should a bankruptcy occur, we would be subject to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern, as further described in Part II, Item 1A. "Risk Factors." Such litigation and related matters are further described in Note 15 to the unaudited condensed consolidated financial statements.

During the three months ended September 27, 2019, we paid $20.0 million upfront, which was recorded within R&D expense, and gained an exclusive worldwide license to Silence's C3 complement asset, SLN500, with options to license up to two additional complement-targeted assets in Silence's preclinical complement-directed RNAi development program. The agreement also includes additional payments to Silence of up to $10.0 million in research milestones for SLN500, in addition to funding for Phase 1 clinical development including good manufacturing practices (GMP). Silence will be responsible for preclinical activities, and for executing the development program of SLN500 until the end of Phase 1, after which we will assume clinical development and responsibility for global commercialization. If approved, Silence could receive up to $563.0 million in commercial milestone payments and tiered low double-digit to high-teen royalties on net sales for SLN500.

Gross profit. Gross profit for the three months ended September 27, 2019 decreased $42.1 million, or 11.5%, to $324.3 million, compared with $366.4 million for the three months ended September 28, 2018, primarily driven by the $56.2 million decrease in net sales. Gross profit margin was 43.6% for the three months ended September 27, 2019, compared with 45.8% for the three months ended September 28, 2018. The decrease in gross profit and gross profit margin was impacted by an additional $23.8 million of amortization for the Ofirmev intangible asset resulting from a change in amortization method as discussed further in Note 11 to the unaudited condensed consolidated financial statements. The additional amortization was partially offset by a decrease in the amortization of the inventory fair value adjustments related to Amitiza, which was fully amortized during the first quarter of 2019.

Selling, general and administrative expenses. SG&A expenses for the three months ended September 27, 2019 were $205.7 million, compared with $193.4 million for the three months ended September 28, 2018, an increase of $12.3 million, or 6.4%. The three months ended September 27, 2019 included a $28.2 million charge associated with the settlement of the MDL Track 1 Cases and $19.8 million in separation costs, partially offset by a $25.8 million decrease in the fair value of our contingent consideration liabilities primarily due to an increase in discount rates. The three months ended September 28, 2018 included an $11.8 million reduction in the accrual associated with our Lower Passaic River, New Jersey environmental remediation liability. The remaining decrease was attributable to various factors, including cost benefits gained from restructuring actions, including lower employee compensation costs, partially offset by increased professional fees and legal expense. As a percentage of net sales, SG&A expenses were 27.7% and 24.2% for the three months ended September 27, 2019 and September 28, 2018, respectively.

Interest expense and interest income. During the three months ended September 27, 2019 and September 28, 2018, net interest expense was $74.7 million and $91.6 million, respectively. This decrease was primarily attributable to a $9.8 million decrease in interest expense due to a lower average outstanding debt balance during the three months ended September 27, 2019. Additionally, the interest accrued on deferred tax liabilities associated with our previously outstanding installment notes resulted in a decrease of $6.4 million. Interest income increased to $2.9 million for the three months ended September 27, 2019, compared with $2.0 million for the three months ended September 28, 2018, primarily related to interest on preferred equity certificates received as contingent consideration associated with the sale of the Nuclear Imaging business.

Income tax benefit. We recognized an income tax benefit of $27.6 million on a loss from continuing operations before income taxes of $28.5 million for the three months ended September 27, 2019, and an income tax benefit of $122.9 million on a loss from continuing operations before income taxes of $8.7 million for the three months ended September 28, 2018. This resulted in effective tax rates of 96.8% and 1,412.6% for the three months ended September 27, 2019 and September 28, 2018, respectively. The income tax benefit for the three months ended September 27, 2019 was comprised of $3.3 million of current tax expense and $30.9 million of deferred tax benefit, which was predominately related to previously acquired intangibles and the generation of tax loss and credit carryforwards net of valuation allowances. The income tax benefit for the three months ended September 28, 2018

Gross profit. Gross profit for the nine months ended September 27, 2019 decreased $59.6 million, or 5.4%, to $1,048.3 million, compared with $1,107.9 million for the nine months ended September 28, 2018, due in part to the $23.1 million decrease in net sales. Gross profit margin was 44.5% for the nine months ended September 27, 2019, compared with 46.5% for the nine months ended September 28, 2018. The decrease in gross profit and gross profit margin was primarily attributable to an additional $89.5 million of amortization for the Ofirmev intangible asset resulting from a change in amortization method during the three months ended March 29, 2019, as discussed further in Note 11 to the unaudited condensed consolidated financial statements. The additional amortization was partially offset by a decrease in the amortization of the inventory fair value adjustments related to Amitiza, which was fully amortized during the first quarter of 2019. Gross profit during the nine months ended September 28, 2018 also benefited from the exclusion of $18.0 million of depreciation and amortization for the Specialty Generics Disposal Group given its classification as held for sale through the third quarter of fiscal 2018.

Selling, general and administrative expenses. SG&A expenses for the nine months ended September 27, 2019 were $661.8 million, compared with $594.5 million for the nine months ended September 28, 2018, an increase of $67.3 million, or 11.3%. This increase was primarily attributable to $50.4 million in separation costs incurred during the nine months ended September 27, 2019, an increase in legal expense, primarily related to opioid defense costs, and a $28.2 million charge associated with the settlement of the MDL Track 1 Cases, partially offset by a $23.5 million decrease in the fair value of our contingent consideration liabilities primarily due to an increase in discount rates. Additionally, during the nine months ended September 28, 2018 we recorded a $35.0 million decrease in the fair value of the contingent consideration liability related to stannsoporfin and an $11.8 million reduction in the accrual associated with our Lower Passaic River, New Jersey environmental remediation liability. These changes were partially offset by cost benefits gained from restructuring actions, including lower employee compensation costs. As a percentage of net sales, SG&A expenses were 28.1% and 25.0% for the nine months ended September 27, 2019 and September 28, 2018, respectively.

Interest expense and interest income. During the nine months ended September 27, 2019 and September 28, 2018, net interest expense was $225.2 million and $273.5 million, respectively. This decrease was primarily attributable to a lower average outstanding debt balance during the nine months ended September 27, 2019, which yielded a decrease in interest expense of $19.9 million, an $18.0 million decrease in interest accrued on deferred tax liabilities associated with our previously outstanding installment notes and the recognition of an $8.6 million benefit to interest expense during the nine months ended September 27, 2019, due to a lapse of certain statute of limitations. For further information, refer to Note 15 to the unaudited condensed consolidated financial statements. Additionally, non-cash interest expense decreased by $1.7 million over the comparable period. During both the nine months ended September 27, 2019 and September 28, 2018, we also recognized interest income of $6.6 million.

Other income, net. During the nine months ended September 27, 2019 and September 28, 2018, we recorded other income, net, of $128.6 million and $17.8 million, respectively. The nine months ended September 27, 2019 included a gain of $98.6 million on debt repurchased, royalty income of $30.3 million and an unrealized gain on the equity securities of $6.5 million related to our investment in Silence, partially offset by a $9.4 million write-off of unamortized debt discount and fees. The nine months ended September 28, 2018 included a gain of $6.5 million on debt repurchased and royalty income of $8.2 million, partially offset by a $3.8 million write-off of unamortized debt discount and fees. The remaining amounts in both periods represented items including gains and losses on intercompany financing, foreign currency transactions and related hedging instruments.

Income tax benefit. We recognized an income tax benefit of $256.6 million on a loss from continuing operations before income taxes of $102.8 million for the nine months ended September 27, 2019, and an income tax benefit of $203.9 million on a loss from continuing operations before income taxes of $107.4 million for the nine months ended September 28, 2018. This resulted in effective tax rates of 249.6% and 189.9% for the nine months ended September 27, 2019 and September 28, 2018, respectively. The income tax benefit for the nine months ended September 27, 2019 was comprised of $47.4 million of current tax expense and $304.0 million of deferred tax benefit. The deferred tax benefit was predominantly related to previously acquired intangibles, the generation of tax loss and credit carryforwards net of valuation allowances, the non-restructuring impairment charge, as well as the reorganization of our intercompany financing and associated legal entity ownership, which eliminated the interest-bearing deferred tax obligation. The income tax benefit for the nine months ended September 28, 2018 was comprised of $29.8 million of current tax expense and $233.7 million of deferred tax benefit. The deferred tax benefit was predominantly related to previously acquired intangibles and the generation of net operating losses.

The income tax benefit was $256.6 million for the nine months ended September 27, 2019, compared with a tax benefit of $203.9 million for the nine months ended September 28, 2018. The $52.7 million net increase in the tax benefit included an increase of $97.2 million attributed to the tax benefit from the reorganization of our intercompany financing and associated legal entity ownership, a $10.1 million increase attributed to separation costs, and an $8.5 million increase attributed to the non-restructuring impairment charge, partially offset by a decrease in tax benefit of $41.8 million predominately attributed to changes in the timing, amount and jurisdictional mix of income, a $11.2 million decrease attributed to net restructuring and related charges and a $10.1 million decrease attributed to the gain on debt repurchased.

Management measures and evaluates our operating segments based on segment net sales and operating income. Management excludes corporate expenses from segment operating income. In addition, certain amounts that management considers to be non-recurring or non-operational are excluded from segment operating income because management evaluates the operating results of the segments excluding such items. These items may include, but are not limited to, intangible asset amortization, net restructuring and related charges, non-restructuring impairment charges and separation costs. Although these amounts are excluded from segment operating income, as applicable, they are included in reported consolidated operating income and in the reconciliations presented below. Selected information by business segment is as follows:

Corporate and allocated expenses. Corporate and allocated expenses were $23.4 million and $29.2 million for the three months ended September 27, 2019 and September 28, 2018, respectively. The three months ended September 27, 2019 included a $28.2 million charge associated with the settlement of the MDL Track 1 Cases, partially offset by a $25.8 million decrease in the fair value of our contingent consideration liabilities primarily due to an increase in discount rates. Three months ended September 28, 2018 included an $11.8 million reduction in the accrual associated with our Lower Passaic River, New Jersey environmental remediation liability and a $7.0 million decrease in fair value of the contingent consideration liability related to stannsoporfin. The remaining decrease was attributable to various factors, primarily driven by cost benefits gained from restructuring actions, including lower employee compensation costs.

Specialty Generics. Operating income for the nine months ended September 27, 2019 decreased $14.6 million to $80.1 million, compared with $94.7 million for the nine months ended September 28, 2018. Operating margin decreased to 14.7% for the nine months ended September 27, 2019, compared with 17.7% for the nine months ended September 28, 2018. The decrease in operating income and margin was primarily impacted by an increase in SG&A primarily due to higher legal expense related to opioid defense costs, partially offset by an $8.4 million decrease in R&D expenses. Operating income and margin during the nine months ended September 28, 2018 benefited from the exclusion of $17.7 million of depreciation for the Specialty Generics Disposal Group given its classification as held for sale through the third quarter of fiscal 2018.

Corporate and allocated expenses. Corporate and allocated expenses were $105.6 million and $85.7 million for the nine months ended September 27, 2019 and September 28, 2018, respectively. The nine months ended September 27, 2019 included a $28.2 million charge associated with the settlement of the MDL Track 1 Cases, partially offset by a $23.5 million decrease the fair value of our contingent consideration liabilities primarily due to an increase in discount rates. The nine months ended September 28, 2018 included a $35.0 million decrease in fair value of the contingent consideration liability related to stannsoporfin and an $11.8 million reduction in the accrual associated with our Lower Passaic River, New Jersey environmental remediation liability. The remaining decrease was primarily driven by cost benefits gained from restructuring actions, including lower employee compensation costs, partially offset by increased professional fees.

Net cash provided by operating activities of $481.1 million for the nine months ended September 28, 2018 was primarily attributable to net income of $111.4 million, adjusted for non-cash items of $391.1 million driven by depreciation and amortization of $597.0 million, partially offset by $232.7 million related to a reduction in our deferred income tax liabilities and a $21.4 million outflow from net investment in working capital. Included within this change in working capital were a $22.1 million net cash outflow related to other assets and liabilities, a $59.0 million increase in accounts receivable, partially offset by a $43.1 million decrease in inventory and a $16.7 million increase in net payables related to income taxes. The net cash outflow from other assets and liabilities was primarily attributable to the payment of liabilities assumed from the acquisition of Sucampo Pharmaceuticals, Inc. ("Sucampo Acquisition") in February 2018.

Net cash used in investing activities was $95.0 million for the nine months ended September 27, 2019, compared with $451.2 million for the nine months ended September 28, 2018. The $356.2 million change primarily resulted from the cash outflows related to the Sucampo Acquisition of $698.0 million, partially offset by the $159.2 million of proceeds received, net of transaction costs, from the divestiture of a portion of the Hemostasis business, inclusive of the PreveLeak and Recothrom products during the nine months ended September 28, 2018; proceeds received of $154.0 million related to the note receivable from the purchaser of the Intrathecal Therapy business, which was sold during the three months ended March 31, 2017; and a $25.5 million cash inflow related to the sale of the remaining portion of our investment in Mesoblast Limited during the nine months ended September 28, 2018. The cash used in investing activities during the nine months ended September 27, 2019 was primarily attributable to $108.7 million in capital expenditures.

Net cash used in financing activities was $265.2 million for the nine months ended September 27, 2019, compared with $998.9 million for the nine months ended September 28, 2018. The $733.7 million decrease in cash outflows was attributable to a $661.1 million decrease in debt repayments, net of issuances, and a $54.9 million decrease in shares repurchased. The significant components of our current year debt repayments included aggregate debt repayments of $281.4 million on our variable-rate term loans, open market debt repurchases that aggregated to a total principal amount of $492.1 million and a repayment of $250.0 million on the receivable securitization program. These repayments were partially offset by a net draw of $680.0 million on our revolving credit facility. The nine months ended September 28, 2018 included debt repayment of $600.0 million related to our revolving credit facility, a $225.0 million voluntary repayment of the variable-rate term loan maturing in 2024, repayment of $366.0 million of assumed debt from the Sucampo Acquisition, a $300.0 million repayment of fully matured unsecured fixed rate notes and open market debt repurchases that aggregated to a total principal amount of $33.0 million.

Debt reduction continues to be one of the primary focuses of our capital allocation strategy for fiscal 2019. Total principal debt reduction during the nine months ended September 27, 2019 was $345.8 million, inclusive of debt repurchases of total principal amount of $492.1 million, repayment of $250.0 million on our variable-rate receivable securitization due July 2020, thus automatically terminating this facility, and voluntary prepayments of $25.0 million and $175.0 million on our outstanding term loans due September 2024 and February 2025, respectively. In making the voluntary prepayments, we satisfied certain obligations included within external debt agreements to reinvest proceeds from the sale of assets and businesses within one year of the respective transaction or use the proceeds to pay down debt. These repayments were partially offset by $680.0 million of aggregate draws on our revolving credit facility during the nine months ended September 27, 2019.

On November 5, 2019, upon the terms and conditions set forth in a confidential offering memorandum dated November 5, 2019, Mallinckrodt International Finance S.A. and Mallinckrodt CB LLC, each a wholly owned subsidiary of ours (the "Issuers") commenced private offers to exchange (the "Exchange Offers") any and all of (i) the 4.875% Senior Notes due April 2020 issued by the Issuers for new 10.000% Second Lien Senior Secured Notes due 2025 to be issued by the Issuers (the "New Notes") and (ii) the 5.750% Senior Notes due August 2022, 4.750% Senior Notes due April 2023, 5.625% Senior Notes due October 2023 and 5.500% Senior Notes due April 2025 issued by the Issuers (collectively, and together with the 4.875% Senior Notes due April 2020, the "Notes") for up to $355.0 million of New Notes. In connection with the Exchange Offers, the Issuers also commenced solicitations of consents from the holders of each series of Notes to (other than the 4.750% Senior Notes due April 2023) amend the indentures governing such series of Notes to eliminate certain of the covenants, restrictive provisions, events of default and related provisions therein. Refer to Part II, Item 1A. "Risk Factors" for information regarding the risks related to the Exchange Offers.

On November 5, 2019, Deerfield Partners, L.P., Deerfield Special Situations Fund, L.P. and Deerfield Private Design Fund IV, L.P. (the "Exchanging Holders") entered into an exchange agreement (the "Exchange Agreement") with the Issuers pursuant to which such Exchanging Holders agreed to, among other things, exchange with the Issuers on the settlement date of the Exchange Offers, separate from such Exchange Offers, their holdings of Notes (comprised of approximately $67.6 million aggregate principal amount 4.875% Senior Notes due April 2020, approximately $258.7 million aggregate principal amount of the 4.750% Senior Notes due April 2023, approximately $98.5 million aggregate principal amount of the 5.625% Senior Notes due October 2023 and approximately $75.2 million aggregate principal amount of 5.500% Senior Notes due April 2025) for approximately $227.0 million aggregate principal amount of New Notes.

In disposing of assets or businesses, we have historically provided representations, warranties and indemnities to cover various risks and liabilities, including unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities related to periods prior to disposition. We assess the probability of potential liabilities related to such representations, warranties and indemnities and adjust potential liabilities as a result of changes in facts and circumstances. We believe, given the information currently available, that their ultimate resolutions will not have a material adverse effect on our financial condition, results of operations and cash flows. These representations, warranties and indemnities are discussed in Note 14 of the notes to the unaudited condensed consolidated financial statements.

We have made forward-looking statements in this Quarterly Report on Form 10-Q that are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include, but are not limited to, information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements and the effects of competition, litigation and future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "plan," "intend," "project," "anticipate," "estimate," "predict," "potential," "continue," "may," "should," "will," "would," "could" or the negative of these terms or similar expressions.

The unaudited condensed consolidated statement of income is exposed to currency risk from intercompany financing arrangements, which primarily consist of intercompany debt and intercompany cash pooling, where the denominated currency of the transaction differs from the functional currency of one or more of our subsidiaries. We performed a sensitivity analysis for these arrangements as of September 27, 2019 that measured the potential unfavorable impact to income from continuing operations before income taxes from a hypothetical 10.0% adverse movement in foreign exchange rates relative to the U.S. dollar, with all other variables held constant. The aggregate potential unfavorable impact from a hypothetical 10.0% adverse change in foreign exchange rates was $1.8 million aggregate potential as of September 27, 2019. This hypothetical loss does not reflect any hypothetical benefits that would be derived from hedging activities, including cash holdings in similar foreign currencies that we have historically utilized to mitigate our exposure to movements in foreign exchange rates.

The financial results of our international operations are translated into U.S. dollars, further exposing us to currency exchange rate fluctuations. We have performed a sensitivity analysis as of September 27, 2019 that measures the change in the net financial position arising from a hypothetical 10.0% adverse movement in the exchange rates of all foreign currencies used, including the Euro and the Canadian Dollar, our most widely used foreign currencies, relative to the U.S. dollar, with all other variables held constant. The aggregate potential change in net financial position from a hypothetical 10.0% adverse change in the above currencies was $15.7 million as of September 27, 2019. The change in the net financial position associated with the translation of these currencies is generally recorded as an unrealized gain or loss on foreign currency translation within accumulated other comprehensive loss in shareholders' equity of our unaudited condensed consolidated balance sheets.

Since 2017, multiple U.S. states, counties, other governmental persons or entities and private plaintiffs have filed lawsuits against certain entities of our company, as well as various other manufacturers, distributors, pharmacies, pharmacy benefit managers, individual doctors and/or others, asserting claims relating to defendants’ alleged sales, marketing, distribution, reimbursement, prescribing, dispensing and/or other practices with respect to prescription opioid medications, including certain of our products. As of November 5, 2019, the cases we are aware of include, but are not limited to, approximately 2,315 cases filed by counties, cities, Native American tribes and/or other government-related persons or entities; approximately 207 cases filed by hospitals, health systems, unions, health and welfare funds or other third-party payers; approximately 104 cases filed by individuals and 14 cases filed by the Attorneys General for New Mexico, Kentucky, Rhode Island, Georgia, Florida, Alaska, New York, Hawaii, Nevada, South Dakota, New Hampshire, Louisiana, Illinois and Idaho, with Idaho being the only state Attorney General to file in federal as opposed to state court. As of November 5, 2019, the Mallinckrodt defendants in these cases consist of Mallinckrodt plc and the following subsidiaries of Mallinckrodt plc: Mallinckrodt Enterprises LLC, Mallinckrodt LLC, SpecGx LLC, Mallinckrodt Brand Pharmaceuticals Inc., Mallinckrodt Inc., MNK 2011 Inc., and Mallinckrodt Enterprises Holdings, Inc. On September 12, 2019, the Attorney General for Ohio filed a motion in the Common Pleas Court of Ross County, Ohio to amend its complaint to add certain entities of our Company, but the court has not yet ruled on that motion. Certain of the lawsuits have been filed as putative class actions.

Most pending federal lawsuits have been coordinated in a federal MDL pending in the U.S. District Court for the Northern District of Ohio. The MDL court has issued a series of case management orders permitting motion practice addressing threshold legal issues in certain cases, allowing discovery, setting pre-trial deadlines and setting a trial date on October 21, 2019 for two cases originally filed in the Northern District of Ohio by Summit County and Cuyahoga County against opioid manufacturers, distributors, and pharmacies. The counties claim that opioid manufacturers’ marketing activities changed the medical standard of care for treating both chronic and acute pain, which led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers’ and distributors’ failure to maintain effective controls against diversion was a substantial cause of the opioid crisis.

violations of Injury Through Criminal Acts, unjust enrichment, and civil conspiracy. Summit County seeks damages including but not limited to actual damages, treble damages, equitable and/or injunctive relief, restitution, disgorgement of profits, compensatory and punitive damages, attorneys’ fees, all costs and expenses of suit, and pre- and post-judgment interest. Cuyahoga County filed a complaint on October 21, 2017, and an amended complaint on April 25, 2018 that added us. Cuyahoga County filed a third amended complaint on May 10, 2019. The third amended complaint contains causes of action and damages similar to those in the Summit County litigation. In June 2019, the parties filed motions for summary judgment and Daubert motions in Summit County and Cuyahoga County. In August and September 2019, the MDL court ruled on the summary judgment and Daubert motions, granting some and denying most others, including Mallinckrodt's Motion for Partial Summary Judgment. On September 6, 2019, the Company announced that it had reached a settlement in principle with Summit County and Cuyahoga County. The settlement fully resolves the Track 1 Cases against all named Mallinckrodt entities that were scheduled to go to trial in October 2019 in the MDL. The Track 1 Cases assert various claims related to the opioid business operated by SpecGx LLC. Under the agreement, we paid a total sum of $24.0 million in cash during the three months ending December 27, 2019. In addition, we will provide $6.0 million in generic products, including addiction treatment products, and also provide a $0.5 million payment in two years in recognition of the counties' time and expenses. Further, in the event of a comprehensive resolution of government-related opioid claims, we have agreed that the two plaintiff counties will receive the value they would have received under such a resolution, less the payments described above. All named Mallinckrodt entities were dismissed with prejudice from the lawsuit. The value of the settlement should not be extrapolated to any other opioid-related cases or claims. On October 21, 2019, the MDL court issued a Stipulated Dismissal Order dismissing the claims against the remaining manufacturers and distributors pursuant to a settlement agreement, and severing the claims against the remaining pharmacy defendant to be heard in a subsequent trial. A hearing is scheduled for November 6, 2019 to discuss the next steps in the MDL, including potential remand of certain cases and which defendants will be included in subsequent trials.

We are also named in 224 similar state court cases in 29 states. These state court cases include actions filed by (1) state attorneys general; (2) counties, cities, and other municipalities; (3) district attorneys; (4) hospitals and other health systems; (5) individuals; (6) third-party payers; and (7) a Native American Tribe. There are differences among these cases. For instance, counties and cities often seek to recoup governmental expenses related to public services, while hospitals and other health systems typically seek compensation for opioid-related medical services. These cases also contain different causes of action. For example, state attorneys general complaints often utilize consumer protection statutes whereas third-party payers tend to focus on claims of fraud and breach of implied warranties. Further, not all lawsuits name the same defendants - some name manufacturers and distributors, while others also include pharmacies, pain clinics, doctors, and/or other individuals as defendants.

Fourteen state attorneys general have filed lawsuits against us in their respective state courts. The Florida Attorney General was the first attorney general to file suit against us on May 15, 2018. The Illinois Attorney General filed the most recent attorney general lawsuit against us on October 28, 2019. In general, the state attorneys general allege that opioid manufacturers engaged in fraudulent or misleading marketing activities that led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on August 14, 2018, the New York Attorney General brought an action against Purdue in the coordinated opioid litigation in Suffolk County, New York. An amended complaint was filed on March 28, 2019, naming us, among other opioid manufacturers, distributors, and individuals. The amended complaint alleges state law violations of the New York State Finance Law, the New York Social Service Law, the New York General Business Law, the New York Controlled Substance Act, and the New York Executive Law, as well as public nuisance, fraud, gross negligence, willful misconduct, and unjust enrichment against us. The amended complaint seeks, among other remedies, declaratory judgment, injunctive relief, the creation of an abatement fund, damages, civil penalties, and the disgorgement of profits. Certain defendants, including us, filed motions to dismiss on May 31, 2019. The State of New York opposed the motions on July 31, 2019 and defendants filed their reply briefs on August 30, 2019. Oral argument on these motions was subsequently held on October 7, 2019, and the motions are still pending. While the New York Attorney General action is illustrative, there are differences between the cases filed by state attorneys general. Each lawsuit contains different causes of action, including different common law claims and alleged violations of state-specific statutes. The lawsuits also contain different claims for damages. For instance, the Kentucky and Hawaii actions seek punitive damages, but the Florida action does not. Further, not all lawsuits name the same defendants - some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants. The New York Attorney General action is currently part of the Track One cases in the New York consolidated proceedings in Suffolk County, New York, with a trial currently scheduled to begin on March 2, 2020. Trial dates have also been set in Louisiana (September 14, 2020), Alaska (January 5, 2021), and New Mexico (September 7, 2021).

There are currently more than 186 lawsuits against us filed by cities, counties, and other municipalities, pending in various state courts in 18 states. The earliest lawsuit that remains in state court was filed by the County of Northampton, Pennsylvania on December 28, 2017. In general, the complaints allege that opioid manufacturers engaged in fraudulent or misleading marketing activities that led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on September 18, 2018, City of Reno filed a complaint in the Second Judicial District Court of Nevada and named us as a defendant, among other opioid manufacturers, distributors, and healthcare providers. An amended complaint was filed in December 3, 2018, following removal to and remand from the U.S. District Court for the District of Nevada. The amended complaint alleges violations of statutory public nuisance, common law public nuisance, negligence, negligent misrepresentation, negligence, and unjust enrichment. City of Reno seeks damages including but not limited to, general and special damages, punitive damages, a fund for establishing a medical monitoring program, restitution and reimbursement, disgorgement, and attorneys’ fees and costs. Defendants, including us, filed motions to dismiss on March 4, 2019; the motions are pending, and a hearing is set for January 2020. On September 16, 2019, City of Reno filed supplemental argument in opposition to the motions to dismiss, to which Defendants filed a response on October 4, 2019. While the City of Reno action is illustrative, there are differences between the cases filed by cities, counties and other municipalities. These lawsuits contain different causes of action, including different common law claims and alleged violations of state-specific statutes. For example, municipalities in Maryland, Pennsylvania, and Virginia assert violations of their state consumer protection statutes, while many other states do not. The lawsuits also contain different claims for damages. For example, the City of Granite City and the County of Jersey, Illinois seek damages for particular public health expenditures, while municipalities in other states allege damages related more generally to costs for public services. Further, not all lawsuits name the same defendants - some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants.

In some jurisdictions, such as California, Connecticut, Illinois, Massachusetts, New York, Pennsylvania, South Carolina, Texas and West Virginia, certain of the 186 state lawsuits filed by counties, cities and other municipalities have been coordinated for pre-trial proceedings before a single court within their respective state court systems. The first coordinated proceeding was formed in New York on July 31, 2017. The most recent state coordinated proceeding was formed in California on September 6, 2019. We are not named as a defendant in each case that may be pending in a particular state court MDL or coordinated proceeding. For example, approximately 44 cases filed by Texas counties are consolidated in the In re: Texas Opioid Litigation, No. 2018-63587, MDL No. 18-0358 (the “Texas MDL”), of which we are named in 13 cases. The Texas complaints generally allege violations of public nuisance, negligence, the Texas Controlled Substances Act, the Deceptive Trade Practices-Consumer Protection Act, unjust enrichment, common law fraud, and civil conspiracy, though there are differences among the complaints. Plaintiffs seek damages including but not limited to injunctive relief, economic and treble damages arising from alleged violations of the Texas Deceptive Trade Practices-Consumer Protection Act, civil penalties for violations of the Texas Controlled Substances Act, abatement of public nuisance, injunctive relief, punitive and actual damages, restitution, and attorneys’ fees. We have filed answers in certain cases. A hearing on bellwether selection and other trial scheduling matters occurred on July 26, 2019, in which eight bellwether counties and alternates were selected as candidates for four trials, the first two of which are scheduled to occur in January 2021 and April 2021. We are currently named in six out of the eight selected bellwether counties but plaintiffs may amend their complaints to add us to the other two cases. Since the bellwether candidates were selected on July 26, 2019, three of the eight bellwether cases have been removed to federal court, one of which has been transferred to the federal MDL. Motions to remand have been filed in the other two cases; no replacement bellwethers have been selected while those cases remain in federal court. At present, we are named in three of the five bellwether candidates that remain in state court, and all three of the bellwethers that have been removed, although we may still be amended into others. Pursuant to the Docket Control Order entered by the court on October 18, 2019, trials are scheduled to begin on January 19, 2021 and April 12, 2021. While the Texas MDL is illustrative, there are differences between the coordinated cases. Each states’ coordinated proceedings contain different causes of action, including different common law claims and alleged violations of state-specific statutes. For example, municipalities in Connecticut, Illinois, Massachusetts, New York, Pennsylvania, South Carolina, and Texas assert violations of their state unfair or deceptive trade practices acts, while other plaintiffs do not. The lawsuits also contain different claims for damages. For example, some of the cases in the Texas MDL request exemplary and punitive damages for gross negligence, while other cases do not. Further, not all lawsuits name the same defendants-some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants. A Case Management Order has been entered in the New York consolidated cases in Suffolk County, which provides for two separate case tracks to proceed to discovery and ultimately to trial. We are named in the three Track One cases with a trial currently scheduled to begin on March 2, 2020.

Six District Attorneys (“DAs”) have also filed lawsuits in state court against us that remain in state court. In general, the DA suits filed in Tennessee allege that defendants engaged in false and deceptive promotion of opioids and contributed to the oversupply and diversion of those products. They also allege that defendants’ actions caused high addiction rates, overdose deaths, and increased rates of neonatal abstinence syndrome. The DAs have initiated lawsuits against opioid manufacturers, distributors, prescribers, retailers, and other individuals. The DAs allege that defendants participated in an illegal opioids market and that plaintiffs suffered damages related to increased law enforcement and health care costs, expenses related to rehabilitation and addiction treatment, prosecution costs, and foster care expenses, among others. Staubus et al. v. Purdue Pharma, LP et al., No. C-41916 was filed in the Circuit Court for Sullivan

County on June 13, 2017 and amended on July 27, 2017 and February 15, 2018. We joined a motion to dismiss filed by the manufacturer defendants and filed a supplemental motion to dismiss regarding Company-specific claims on March 23, 2018. The court held a hearing on the motion to dismiss, in addition to other motions, on May 8, 2018. The court denied the motions to dismiss in an order filed on June 12, 2018. We filed an answer to the second amended complaint on June 29, 2018. The parties are currently engaged in discovery, and the court has set a trial date to begin on May 18, 2020. Effler et al. v. Purdue Pharma, LP et al., No. 16596 was filed in the Circuit Court for Campbell County on September 29, 2017 and amended on October 6, 2017, January 10, 2018 and May 21, 2018. We joined a motion to dismiss filed by the manufacturer defendants on July 27, 2018. The court held a hearing on the motion to dismiss on October 4, 2018 and issued an order granting the manufacturer defendants’ motion to dismiss on October 5, 2018. Plaintiffs filed a Notice of Appeal on November 1, 2018. We joined defendants-appellees’ response brief which was filed on May 28, 2019. Plaintiff-appellants’ filed their reply brief on July 11, 2019, and oral argument occurred on July 18, 2019. On September 11, 2019, the court granted Plaintiffs' appeal, reversing the trial court's judgment and remanding the case for further proceedings. Any party that wishes to appeal this ruling must petition the Tennessee Supreme Court by November 12, 2019. Dunaway et al. v. Purdue Pharma, LP et al., No. CCI-2018-cv-6347 was filed in the Circuit Court for Cumberland County on January 10, 2018 and amended on August 7, 2018. We joined a motion to dismiss filed by the manufacturer defendants on September 21, 2018. Plaintiffs filed a second amended complaint on April 1, 2019, adding new defendants. A distributor defendant removed the action on May 3, 2019, and the district court remanded the case on May 22, 2019. We joined a motion to dismiss filed by the manufacturer defendants on July 15, 2019. Plaintiffs' opposition to defendants' motions to dismiss were filed on September 30, 2019. Replies are due on November 13, 2019, and oral argument is scheduled for December 16, 2019. Other than Staubus et al. v. Purdue Pharma, LP et al., there are currently no trials set in these cases.

With respect to the DA lawsuits filed in Pennsylvania, the first lawsuit that remains in state court was filed by the Commonwealth of Pennsylvania by John T. Adams, District Attorney of Berks County in the Berks County Court of Common Pleas on October 16, 2019. The most recent DA lawsuit that remains in state court was filed by the Commonwealth of Pennsylvania, acting by and through Francis T. Chardo, the District Attorney of Dauphin County in the Dauphin County Court of Common Pleas on October 23, 2019. In general, these DA cases allege that opioid manufacturers engaged in fraudulent or misleading marketing activities that led to increased use of prescription opioid products. They also allege that distributors failed to maintain effective controls over the opioid distribution system and attempted to evade restrictions on opioid distribution. Plaintiffs in all three cases bring claims for alleged violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law and Civil Conspiracy. Plaintiffs in all three cases seek damages related to services associated with addiction, overdoses, adverse health conditions, emergency response, hospitalization, and public safety conditions attributable to the opioid products manufactured and distributed by defendants, among other relief. There are currently no trials set in these cases.

Hospitals and other health systems have also filed lawsuits in state courts against us, and there are currently six such lawsuits. The first lawsuit that remains in state court was filed by Tucson Medical Center (“TMC”) in Arizona on October 9, 2018. The other five lawsuits that remain in state court were filed by (1) various hospitals and other health systems in West Virginia on April 29, 2019; (2) various hospitals and other health systems in Arizona on June 18, 2019; (3) various hospitals and other health systems in Florida on September 16, 2019; (4) Mobile County Board of Health and Family Oriented Primary Health Care Clinic in Alabama on October 15, 2019; and (5) various hospitals and other health systems in Mississippi on October 16, 2019. The plaintiffs allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on October 9, 2018, TMC filed a complaint in the Pima County Superior Court, Arizona against us, among other opioid manufacturers and distributors. On July 15, 2019, TMC filed a First Amended Complaint, which asserts claims for negligence, wanton negligence, negligence per se, negligent marketing, negligent distribution, nuisance, unjust enrichment, fraud and deceit, civil conspiracy, fraudulent concealment, and violations of Arizona’s RICO Act and Consumer Fraud Act. TMC seeks damages and costs. Defendants, including us, filed motions to dismiss the complaint, which were denied by the court on September 16, 2019. While the TMC action is illustrative, there are differences between these cases. Each lawsuit contains different causes of action, including different common law claims and alleged violations of state-specific statutes. Further, not all lawsuits name the same defendants. For example, TMC and the other Arizona plaintiffs names manufacturers, distributors and pharmacies as defendants, while the West Virginia, Florida, Alabama and Mississippi plaintiffs also include individuals as defendants. There are currently no trials set in these cases.

Individuals have filed lawsuits in state courts against us, and there are currently five such lawsuits. The first lawsuit that remains in state court was initially filed by the Estate of Bruce Brockel in the Circuit Court of Mobile County, Alabama, on October 25, 2017, and amended to add us to plaintiff’s first amended complaint on February 5, 2018. The most recent lawsuit that remains in state court was filed by plaintiff Elizabeth Lavoise in the 22nd Judicial Circuit Court, City of St. Louis, Missouri, on August 21, 2019. In general, these lawsuits allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. Individual plaintiffs generally claim that they suffered damages

related to increased healthcare costs, or wrongful death. For example, on December 5, 2018, the Estate of Bruce Brockel filed a third amended complaint in the Circuit Court of Mobile County, Alabama against us, among other prescription opioid manufacturers and individual doctors. The complaint contains a variety of causes of actions, including medical malpractice, negligence, wantonness, Alabama extended manufacturer’s doctrine, fraud and misrepresentation, suppression and concealment, deceit, unjust enrichment and civil conspiracy. The plaintiff alleges that manufacturers engaged in the false and deceptive promotion of opioids, which led to the oversupply of opioids and caused decedent’s death. The plaintiff seeks damages in an unspecified amount. We moved to dismiss the complaint on March 26, 2019. An opposition to the motion to dismiss was filed on April 25, 2019. The motion is currently pending. While the Brockel action is illustrative, there are differences among the cases filed by individuals. Many of these lawsuits contain different causes of action. For example, Brockel asserts a claim for civil conspiracy, while two of the individual actions filed in Missouri state court do not. One of the cases, Robert Ruth, is a putative class action, asserting claims on behalf of Missouri citizens who purchased or paid for health insurance policies. Further, not all lawsuits name the same defendants. For example, some lawsuits name only us as defendants, while others also include other manufacturers, pharmacies, and/or individuals. There are currently no trials set in these cases.

Third-party payers, such as insurers, have also filed lawsuits in state courts against us. There are currently seven such lawsuits. The first lawsuit that remains in state court was filed by United Food and Commercial Workers (UFCW), Local 23 and Employers Health Fund in Pennsylvania on April 24, 2018. The most recent lawsuit that remains in state court, was filed by Steamfitters Local 449 Medical and Benefit Fund, on September 11, 2019. In general, plaintiffs allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. Third-party payer plaintiffs claim that they paid costs for health issues stemming from opioid overuse.

The Illinois Public Risk Fund case asserts state law claims against the Company such as violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, fraudulent misrepresentation, insurance fraud, negligence, public nuisance and unjust enrichment. Fire and Police Retiree Health Care Fund, filed in Bexar County District Court in Texas and transferred to the Texas MDL, asserts similar state law claims against us, including public nuisance, common law fraud, negligence, gross negligence, unjust enrichment, civil conspiracy and fraudulent concealment. The remaining five cases are in Pennsylvania state court, where they have all been consolidated in the coordinated proceedings in Delaware County, Pennsylvania. The Pennsylvania complaints assert state law claims such as violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law statute, public nuisance, negligence, unjust enrichment, common law fraud, breach of implied warranties, negligence per se, negligent misrepresentation, negligent marketing and civil conspiracy. The Court denied the manufacturer defendants' preliminary objections on October 30, 2019 and certain test cases are proceeding to discovery. There are differences between these cases. Certain of these lawsuits contain different causes of action. For example, a case filed by Carpenters Health and Welfare Fund of Philadelphia and Vicinity asserts a claim for public nuisance, while a case filed by the International Union of Painters and Allied Trades, District Council 21 Welfare Fund does not. The lawsuits also contain different claims for damages. For instance, Carpenters Health seeks a declaratory judgment regarding plaintiffs’ public nuisance claims, but Painters and Allied Trades does not. Further, not all lawsuits name the same defendants - some name manufacturers, while at least one lawsuit includes individuals as defendants. There are currently no trials set in these cases.

One Native American tribe has also filed a lawsuit in state court against us that remains in state court. The Apache Tribe of Oklahoma filed a lawsuit in Oklahoma state court on July 26, 2019. The plaintiff alleges that defendants downplayed the risks of prescription opioids, overstated their benefits, used third-parties to promote false information about prescription opioids, and failed to prevent the diversion of prescription opioid products. The complaint asserts claims for public nuisance, actual and constructive fraud, negligence and negligent misrepresentation, civil conspiracy and unjust enrichment. Plaintiff seeks punitive damages, actual damages, compensation for past and future costs of abatement, an abatement fund and attorneys' fees and costs. We have not yet filed a response to the complaint.

We will continue to vigorously defend ourselves against all of these lawsuits as detailed above and similar lawsuits that may be brought by others. As of the date of this report, we have held preliminary discussions with certain plaintiffs in other pending opioid lawsuits and are likely to have further discussions and/or enter into additional discussions with other parties in connection with opioid lawsuits. We may be required to pay material amounts and/or incur other material obligations as a result of any settlements that are entered into as a result of such discussions, but we are unable to predict outcomes or estimate a range of reasonably possible losses. Further, such matters or the resolution thereof, whether through judicial process or settlement or otherwise, may make it necessary or advisable for us and/or one or more of our subsidiaries to seek to restructure our or their obligations in a bankruptcy proceeding. We are exploring a wide array of such potential outcomes as part of our contingency planning, including the impact such actions could have on our business and operations. Should a bankruptcy occur, we would be subject to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern, as further described in Part II, Item 1A. "Risk Factors."

In addition to the lawsuits described above, certain entities of the Company have received subpoenas and civil investigative demands (“CIDs”) for information concerning the sale, marketing and/or distribution of prescription opioid medications and the Company’s suspicious order monitoring programs, including from the DOJ and the Attorneys General for Missouri, New Hampshire, Kentucky, Washington, Alaska, South Carolina, Puerto Rico, New York, West Virginia, Indiana and the Divisions of Consumer Protection and Occupational and Professional Licensing of the Utah Department of Commerce, and the New York State Department of Financial Services. We have been contacted by the coalition of State Attorneys General investigating the role manufacturers and distributors may have had in contributing to the increased use of opioids in the U.S. On January 27, 2018, we received a grand jury subpoena from the U.S. Attorneys’ Office (“USAO”) for the Southern District of Florida for documents related to the distribution, marketing and sale of generic oxymorphone products. On April 17, 2019, we received a grand jury subpoena from the USAO for the Eastern District of New York (“EDNY”) for documents related to the sales and marketing of controlled substances, the policies and procedures regarding controlled substances, and other related documents. On June 4, 2019, we received a rider from the USAO for EDNY requesting additional documents regarding our anti-diversion program. We are responding or have responded to these subpoenas, CIDs and any informal requests for documents.

On October 24, 2018, we filed suit in the U.S. District Court for the Southern District of New York against the State of New York, asking the court to declare New York State’s Opioid Stewardship Act (“OSA”) unconstitutional and to enjoin its enforcement. On December 19, 2018, the court declared the OSA unconstitutional and granted our motion for preliminary injunctive relief. On January 17, 2019, the State of New York appealed the court’s decision. We intend to vigorously assert our position in this matter. In April 2019, the State of New York passed its 2020 budget, which amended the OSA so that if the OSA decision is reversed on appeal, the OSA would apply only to the sale or distribution of certain opioids in New York for 2017 and 2018 and, effective July 1, 2019, imposed an excise tax on certain opioids.

In November 2011 and October 2012, we received subpoenas from the U.S. Drug Enforcement Administration ("DEA") requesting production of documents relating to our suspicious order monitoring program for controlled substances. The USAO for the Eastern District of Michigan investigated the possibility that we failed to report suspicious orders of controlled substances during the period 2006-2011 in violation of the Controlled Substances Act and its related regulations. The USAO for the Northern District of New York and Office of Chief Counsel for the U.S. DEA investigated the possibility that we failed to maintain appropriate records and security measures with respect to manufacturing of certain controlled substances at our Hobart facility during the period 2012-2013. In July 2017, we entered into a final settlement with the DEA and the USAOs for the Eastern District of Michigan and the Northern District of New York to settle these investigations. As part of the agreement, we paid $35.0 million in fiscal 2017 to resolve all potential claims and agreed, as part of a Memorandum of Agreement (“MOA”), to utilize all available transaction information to identify suspicious orders of any of our controlled substance products and to report to the DEA when we conclude that chargeback data or other information indicates that a downstream registrant poses a risk of diversion, among other things. The MOA remains in effect until July 10, 2020, but we will continue utilizing all available transaction information to identify suspicious orders for reporting to the DEA beyond that date.

In addition, a significant number of lawsuits have been filed against us, other opioid manufacturers, distributors and others in the supply chain by cities, counties, state Attorneys General and private persons seeking to hold us and others accountable for opioid misuse and abuse. As of November 5, 2019, the cases we are aware of include, but are not limited to, approximately 2,315 cases filed by counties, cities, Native American tribes and/or other government-related persons or entities; approximately 207 cases filed by hospitals, health systems, unions, health and welfare funds or other third-party payers; approximately 104 cases filed by individuals and 14 cases filed by the Attorneys General for New Mexico, Kentucky, Rhode Island, Georgia, Florida, Alaska, New York, Hawaii, Nevada, South Dakota, New Hampshire, Louisiana, Illinois and Idaho, with Idaho being the only state Attorney General to file in federal as opposed to state court. As of November 5, 2019, the Mallinckrodt defendants in these cases consist of Mallinckrodt plc and the following subsidiaries of Mallinckrodt plc: Mallinckrodt Enterprises LLC, Mallinckrodt LLC, SpecGx LLC, Mallinckrodt Brand Pharmaceuticals Inc., Mallinckrodt Inc., MNK 2011 Inc. and Mallinckrodt Enterprises Holdings, Inc. However, there can be no assurance that plaintiffs will not assert claims against additional Mallinckrodt plc subsidiaries in the future. The lawsuits assert a variety of claims, including, but not limited to, public nuisance, negligence, civil conspiracy, fraud, violations of the RICO or similar state laws, violations of state Controlled Substances Act (“CSA”) or state False Claims Act, product liability, consumer fraud, unfair or deceptive trade practices, false advertising, insurance fraud, unjust enrichment and other common law and statutory claims arising from defendants’ manufacturing, distribution, marketing and promotion of opioids and seek restitution, damages, injunctive and other relief and attorneys’ fees and costs. The claims generally are based on alleged misrepresentations and/or omissions in connection with the sale and marketing of prescription opioid medications and/or an alleged failure to take adequate steps to prevent diversion. Other parties may file similar lawsuits against us in the future.

As a company that first began processing opioids in the 1890s, we understand the utility of these products and that they are safe and effective when taken as appropriately prescribed. We are deeply committed to diversion control efforts, have sophisticated systems in place to identify suspicious orders and engage in significant due diligence and ongoing monitoring of customers. While we are vigorously defending ourselves in these matters, the nature and scope of these matters is unique and current public perceptions of the public health issue of opioid abuse, together with the manner in which other defendants in those cases resolve opioid-related lawsuits and other actions, may present challenges to favorable resolution of these claims. Accordingly, it is not feasible to predict the ultimate outcome of these investigations, enforcement actions and lawsuits. The allegations against us may negatively affect our business in various ways, including through harm to our reputation. We will continue to incur significant legal costs in defending these matters and could in the future be required to pay significant amounts as a result of fines, penalties, settlements or judgments, potentially in excess of established accruals. We may be unable to obtain or maintain insurance in the future on acceptable terms or with adequate coverage against potential liabilities or other losses. Any such potential liabilities or losses could also require us to seek financing, which may not be available on terms acceptable to us, or at all, when required. As of November 5, 2019, we have been in preliminary discussions with certain plaintiffs in pending opioid lawsuits and are likely to have further discussions and/or enter into additional discussions with other parties in connection with opioid lawsuits and/or incur other material obligations. We may be required to pay material amounts and/or incur other material obligations as a result of any settlements that are entered into as a result of such discussions.

Such matters or the resolution thereof, or increase in accruals thereof, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, such matters or the resolution thereof, whether through judicial process or settlement or otherwise may make it necessary or advisable for us and/or one or more of our subsidiaries to seek to restructure our or their obligations in a bankruptcy proceeding. We are exploring a wide array of such potential outcomes as part of our contingency planning, including the impact such actions could have on our business and operations. Should a bankruptcy occur, we would be subject to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern, including, but not limited to by causing increased difficulty obtaining and maintaining commercial relationships on competitive terms with customers, suppliers and other counterparts; increased difficulty retaining and motivating key employees, as well as attracting new employees; diversion of management’s time and attention to dealing with bankruptcy and restructuring activities rather than focusing exclusively on business operations; incurrence of substantial costs, fees and other expenses associated

In addition, legislative, regulatory or industry measures to address the misuse of prescription opioid medications may also affect our business in ways that we are not able to predict. For example, the State of New York enacted the OSA, which went into effect on July 1, 2018 and established an aggregate $100 million annual assessment on sales of certain opioid medications in New York. The OSA was successfully challenged, and on December 19, 2018, the U.S. District Court for the Southern District of New York ruled that the OSA was unconstitutional and enjoined its enforcement. On January 17, 2019, the State of New York appealed this ruling. The litigation is still pending. In April 2019, the State of New York passed its 2020 budget, which amended the OSA so that if the OSA decision is reversed on appeal, the OSA would apply only to the sale or distribution of certain opioids in New York for 2017 and 2018 and, effective July 1, 2019, imposed an excise tax on certain opioids. Furthermore, other states are considering similar legislation that could require entities to pay an assessment or tax on the sale or distribution of opioid medications in those states and may vary in the assessment or tax amounts and the means of calculation from the OSA. If other state or local jurisdictions successfully enact such legislation and we are not able to mitigate the impact on our business through operational changes or commercial arrangements, such legislation in the aggregate may have a material adverse effect on our business, financial condition, results of operations and cash flows. See the risk factor “Extensive laws and regulations govern the industry in which we operate, and any failure to comply with such laws and regulations, including any changes to those laws and regulations may materially adversely affect us” previously disclosed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 28, 2018 filed with the U.S. SEC on February 26, 2019 for more information.

As disclosed in our Form 10-K for the fiscal year 2018, we previously identified a material weakness in our internal control over financial reporting related to review and approval controls over future cash flow forecasts used to develop certain management estimates, including those related to goodwill and other intangible assets. This control deficiency did not result in a material misstatement of our current or prior period consolidated financial statements. During the three months ended March 29, 2019, our management, under the oversight of our executive leadership team and those charged with governance, completed the remedial actions below to improve our internal control over financial reporting and remediated the design of the material weakness:

Sales of our products depend, in part, on the extent to which the costs of our products are reimbursed by governmental health administration authorities, private health coverage insurers and other third-party payers. The ability of patients to obtain appropriate reimbursement for products and services from these third-party payers affects the selection of products they purchase and the prices they are willing to pay. In the U.S., there have been, and we expect there will continue to be, a number of state and federal proposals that limit the amount that third-party payers may pay to reimburse the cost of drugs, for example with respect to Acthar Gel. We believe the increasing emphasis on managed care in the U.S. has and will continue to put pressure on the usage and reimbursement of Acthar Gel. Our ability to commercialize our products depends, in part, on the extent to which reimbursement for the costs of these products is available from government healthcare programs, such as Medicaid and Medicare, private health insurers and others. We cannot be certain that, over time, third-party reimbursements for our products will be adequate for us to maintain price levels sufficient for realization of an appropriate return on our investment.

In addition, a number of markets in which we operate have implemented or may implement tender systems in an effort to lower prices. Under such tender systems, manufacturers submit bids which establish prices for products. The company that wins the tender receives preferential reimbursement for a period of time. Accordingly, the tender system often results in companies underbidding one another by proposing low pricing in order to win the tender. Certain other countries may consider implementation of a tender system. Even if a tender system is ultimately not implemented, the anticipation of such could result in price reductions. Failing to win tenders, or the implementation of similar systems in other markets leading to price declines, could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

We are unable to predict what additional legislation or regulation or changes in third-party coverage and reimbursement policies may be enacted or issued in the future or what effect such legislation, regulation and policy changes would have on our business. In May 2019, CMS issued a decision requiring that we revert to the base date AMP used to calculate Medicaid drug rebates for Acthar Gel. We subsequently filed suit in federal district court against the Agency seeking to hold unlawful and set aside this decision. We plan to vigorously defend our position. If we are unsuccessful in our efforts to set aside CMS’s decision, Medicaid net sales of Acthar Gel could be substantially eliminated and our efforts to continue building on our investment in non-sales and marketing activities to modernize Acthar Gel could be significantly undermined.

We rely on a combination of patents, trademarks, trade secrets, proprietary know-how, market exclusivity gained from the regulatory approval process and other intellectual property to support our business strategy, most notably in relation to Acthar Gel, Ofirmev, Inomax, Therakos and Amitiza products. However, our efforts to protect our intellectual property rights may not be sufficient. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, or if there is a change in the way courts and regulators interpret the laws, rules and regulations applicable to our intellectual property, our competitiveness could be impacted, which could adversely affect our competitive position, business, financial condition, results of operations and cash flows.

Certain patents related to the use of therapeutic nitric oxide for treating or preventing bronchoconstriction or reversible pulmonary vasoconstriction expired in 2013. Prior to their expiration, we depended, in part, upon these patents to provide us with exclusive marketing rights for our product for some period of time. Since then, we have obtained additional patents, which expire at various dates through 2036, including patents on methods of identifying patients at risk of serious adverse events when nitric oxide is administered to patients with particular heart conditions. Such methods have been approved by the FDA for inclusion in the Warnings and Precautions sections of the Inomax label. Other patents are on inhaled nitric oxide gas delivery systems as well as methods of using such systems, and on use of nitric oxide gas sensors. The Paragraph IV patent litigation trial against Praxair Distribution, Inc. and Praxair, Inc. (collectively “Praxair”) to prevent the marketing of its potential infringing nitric oxide drug product delivery system prior to the expiration of the patents covering Inomax was held in March 2017 and a decision was rendered September 5, 2017 that ruled five patents invalid and six patents not infringed. We appealed the decision to the Court of Appeals for the Federal Circuit, which upheld the lower court’s decision on August 27, 2019. We filed a petition for en banc review at the Federal Circuit on September 26, 2019. While Praxair received FDA approval of their Abbreviated New Drug Application (ANDA) for their Noxivent nitric oxide and clearance of their 510(k) for their NOxBOXi device on October 2, 2018, the Noxivent product received an AA-rating and the Noxivent label states that Noxivent must be delivered using the NOxBOXi device. The Court of Appeals’ decision with respect to the Praxair litigation ultimately could result in the launch of a competitive nitric oxide product before the expiration of the last of the patents listed in the FDA Orange Book, which could adversely affect our ability to successfully maximize the value of Inomax and have an adverse effect on the company’s competitive position, business, financial condition, results of operations and cash flows.

The active ingredient in Ofirmev is acetaminophen. Patent protection is not available for the acetaminophen molecule itself in the territories licensed to us, which include the U.S. and Canada. As a result, competitors who obtain the requisite regulatory approval can offer products with the same active ingredient as Ofirmev so long as the competitors do not infringe any process or formulation patents that we have in-licensed from Bristol-Myers Squibb and its licensor, New Pharmatop LLC and any method-of-use patents that we subsequently obtained. The latest expiration date of the in-licensed patents is 2021 whereas the latest expiration date of the subsequently obtained Company-owned patents is 2032. Settlement agreements have been reached in association with certain challenges to the in-licensed patents, which allow for generic competition to Ofirmev in December 2020, or earlier under certain circumstances.

Our Therakos products focus on extracorporeal photopheresis, which is an autologous immune cell therapy that is indicated in the U.S. for skin manifestations of cutaneous T-cell lymphoma and is available for several additional indications in markets outside the U.S. In the extracorporeal photopheresis (“ECP”) process, blood is drawn from the patient, separating white blood cells from plasma and red blood cells (which are immediately returned to the patient). The separated white blood cells are treated with an Ultraviolet-A (“UVA”) light activated drug, UVADEX^® (methoxsalen) Sterile Solution, followed by UVA radiation in the photopheresis instrument, prior to being returned to the patient. Patents related to the methoxsalen composition have expired. Therakos historically manufactured two photopheresis systems, the CELLEX^® Photopheresis System (“CELLEX”), which is the only FDA-approved closed ECP system, and the UVAR XTS^® Photopheresis System (“UVAR XTS”). While the company no longer manufactures the UVAR XTS system, disposable, sterile kits are still supplied to customers for each of the systems. The kits are single use and discarded after a treatment. Certain key patents related to the UVAR XTS system, disposable kit and overall photopheresis method expire in 2020. Key patents related to the CELLEX system, disposable kit and overall photopheresis method expire in 2023. We continue to pursue additional patentable enhancements to the Therakos ECP system. Patent applications were filed in 2016 relating to improvements to the CELLEX system, disposable kit and overall photopheresis method, that, if approved, may offer patent protection through approximately 2036.

Our pending patent applications may not result in the issuance of patents, or the patents issued to or licensed by us in the past or in the future may be challenged or circumvented by competitors. Existing patents may be found to be invalid or insufficiently broad to preclude our competitors from using methods or making or selling products similar or identical to those covered by our patents and patent applications. Regulatory agencies may refuse to grant us the market exclusivity that we were anticipating, or may unexpectedly grant market exclusivity rights to other parties. In addition, our ability to obtain and enforce intellectual property rights is limited by the unique laws of each country. In some countries it may be particularly difficult to adequately obtain or enforce intellectual property rights, which could make it easier for competitors to capture market share in such countries by utilizing technologies and product features that are similar or identical to those developed or licensed by us. Competitors also may harm our sales by designing products that mirror the capabilities of our products or technology without infringing our patents, including by coupling separate technologies to replicate what our products accomplish through a single system. Competitors may diminish the value of our trade secrets by reverse engineering or by independent invention. Additionally, current or former employees may improperly disclose such trade secrets to competitors or other third parties. We may not become aware of any such improper disclosure, and, in the event we do become aware, we may not have an adequate remedy available to us.

In the U.S. over the past several years, a significant number of pharmaceutical and biotechnology companies have been subject to inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities in connection with the promotion of products for unapproved uses and other sales, marketing and pricing practices, including the DOJ and various other agencies including the Office of the Inspector General within the HHS, the FDA, the Federal Trade Commission and various state Attorneys General offices. These investigations have alleged violations of various federal and state laws and regulations, including claims asserting antitrust violations, violations of the U.S. Federal Food, Drug and Cosmetic Act (FFDCA), the False Claims Act, the Prescription Drug Marketing Act, anti-kickback laws, data and patient privacy laws, export and import laws, consumer protection laws and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. The DOJ and the SEC have also increased their focus on the enforcement of the Foreign Corrupt Practices Act of 1977 (FCPA), particularly as it relates to the conduct of pharmaceutical companies.

Many of these investigations originate as “qui tam” actions under the False Claims Act. Under the False Claims Act, any individual can bring a claim on behalf of the government alleging that a person or entity has presented a false claim, or caused a false claim to be submitted, to the government for payment. The person bringing a “qui tam” suit is entitled to a share of any recovery or settlement. Qui tam suits, also commonly referred to as “whistleblower suits,” are often brought by current or former employees. In a qui tam suit, the government must decide whether to intervene and prosecute the case. If the government declines to intervene and prosecute the case, the individual may pursue the case alone. If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses in connection with past or future activities, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as the possible exclusion from federal healthcare programs including Medicare and Medicaid, consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or other sanctions could have an adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Specific to our business, in September 2012, prior to our acquisition of Questcor in August 2014, a subpoena was received from the USAO for the Eastern District of Pennsylvania, requesting documents pertaining to an investigation of its promotional practices. On or about March 8, 2019, the U.S. District Court for the Eastern District of Pennsylvania unsealed two qui tam actions involving the allegations under investigation by the USAO for the Eastern District of Pennsylvania. The DOJ intervened in both actions, which have since been consolidated. In September 2019, we executed a settlement agreement to resolve the portion of the investigation and the litigation involving promotional practices for $15.4 million. If any of our current practices related to the legacy Questcor business are found to be unlawful, we will have to change those practices, which could have a material adverse effect on our business, financial condition and results of operations. Further, if as a result of this investigation or litigation we are found to have violated one or more applicable laws, we could be subject to a variety of fines, penalties, and related administrative sanctions, and our business, financial condition, results of operations and cash flows could be materially adversely affected.

In addition, there has recently been enhanced scrutiny of company-sponsored patient assistance programs, including insurance premium and co-pay assistance programs and donations to third-party charities that provide such assistance. If we are deemed to have failed to comply with relevant laws, regulations or government guidance in any of these areas, we could be subject to criminal and civil sanctions, including significant fines, civil monetary penalties and exclusion from participation in government healthcare programs, including Medicare and Medicaid, actions against executives overseeing our business, and burdensome remediation measures. As discussed above, the USAO for the Eastern District of Pennsylvania is investigating this issue and the U.S. District Court for the Eastern District of Pennsylvania has unsealed two qui tam actions involving the allegations that are the subject of this investigation. In addition, in December 2016, we received a subpoena from the USAO for the District of Massachusetts requesting documents related to our support of 501(c)(3) organizations that provide financial assistance to patients and documents concerning our provision of financial assistance to patients prescribed Acthar Gel. Other companies have disclosed similar inquiries. We are cooperating with this inquiry. It is possible that any actions taken by the DOJ or one of the USAOs as a result of this inquiry or any future action taken by federal or local governments, legislative bodies and enforcement agencies on this subject could result in civil penalties or injunctive relief, negative publicity or other negative actions that could harm our reputation, and could reduce demand for our products and/or reduce coverage of our products, including by federal healthcare programs such as Medicare and Medicaid and

The DEA is the U.S. federal agency responsible for domestic enforcement of the CSA. The CSA classifies drugs and other substances based on identified potential for abuse. Schedule I controlled substances, such as heroin and LSD, have a high abuse potential and have no currently accepted medical use; thus, they cannot be lawfully marketed or sold. Schedule II controlled substances include molecules such as oxycodone, oxymorphone, morphine, fentanyl and hydrocodone. The manufacture, storage, distribution and sale of these controlled substances are permitted, but highly regulated. The DEA regulates the availability of API, products under development and marketed drug products that are in the Schedule II category by setting annual quotas. Every year, we must apply to the DEA for manufacturing quota to manufacture API and procurement quota to manufacture finished dosage products. Given that the DEA has discretion to grant or deny our manufacturing and procurement quota requests, the quota the DEA grants may be insufficient to meet our needs. In 2018, manufacturing and procurement quotas granted by the DEA were sufficient to meet our sales and inventory requirements on most products. In November 2017, the DEA reduced the amount of almost every Schedule II opiate and opioid medication that may be manufactured in the U.S. in 2018 by 20% and could take similar actions in the future. In December 2018, the DEA reduced the amount of the six most frequently misused opioids that may be manufactured in the U.S. in calendar year 2019 by an average of 10% as compared to the 2018 amount. On September 13, 2019, the DEA proposed that benzylfentanyl and 4-anilinopiperidine be controlled as list I chemicals under the CSA. On September 17, 2019, the DEA proposed to designate norfentanyl as an immediate precursor (i.e., a substance from which another is formed) for fentanyl and to make it a Schedule II controlled substance under the CSA. The DEA could take similar actions in the future. Future delay or refusal by the DEA to grant, in whole or in part, our quota requests could delay or result in stopping the manufacture of our marketed drug products, new product launches or the conduct of bioequivalence studies and clinical trials. Such delay or refusal also could require us to allocate marketed drug products among our customers. These factors, along with any delay or refusal by the DEA to provide customers who purchase API from us with sufficient quota, could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

The regulations regarding reporting and payment obligations with respect to Medicare and Medicaid reimbursement programs, and rebates and other governmental programs, are complex. Because our processes for these calculations and the judgments used in making these calculations involve subjective decisions and complex methodologies, these accruals may have a higher inherent risk for material changes in estimates. In addition, they are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could result in material adjustments to amounts previously paid. See “Sales of our products are affected by, and we may be negatively impacted by any changes to, the reimbursement practices of governmental health administration authorities, private health coverage insurers and other third-party payers. In addition, reimbursement criteria or policies and the use of tender systems outside the U.S. could reduce prices for our products or reduce our market opportunities.”

Any governmental agencies that have commenced, or may commence, an investigation of us relating to the sales, marketing, pricing, quality or manufacturing of pharmaceutical products could seek to impose, based on a claim of violation of fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal healthcare programs including Medicare and Medicaid. Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to how to properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority may take a position contrary to a position we have taken, and may impose civil and/or criminal sanctions. For example, from time to time, state attorneys general have brought cases against us that allege generally that we and numerous other pharmaceutical companies reported false pricing information in connection with certain drugs that are reimbursable under Medicaid, resulting in overpayment by state Medicaid programs for those drugs, and generally seek monetary damages and attorneys’ fees. Any such penalties or sanctions that we might become subject to in this or other actions could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

A breach of the covenants under the agreements that govern the terms of any of our indebtedness could result in an event of default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement that governs our senior secured credit facilities would permit the lenders under such facilities to terminate all commitments to extend further credit thereunder. Furthermore, if we are unable to repay the amounts due and payable under our senior secured credit facilities or the New Notes, those lenders or investors will be able to proceed against the collateral granted to them to secure that indebtedness. If the holders of our debt accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness.



Ireland		98-1088325
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



(Title of each class)	(Trading Symbol(s))	(Name of each exchange on which registered)
Ordinary shares, par value $0.20 per share	MNK	New York Stock Exchange



Large Accelerated Filer	☒	Accelerated Filer	☐	Emerging Growth Company	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐



		Page

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).
	Condensed Consolidated Statements of Income for the three and nine months ended September 27, 2019 and September 28, 2018.	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 27, 2019 and September 28, 2018.	3
	Condensed Consolidated Balance Sheets as of September 27, 2019 and December 28, 2018.	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 27, 2019 and September 28, 2018.	5
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 27, 2019 and September 28, 2018.	6
	Notes to Condensed Consolidated Financial Statements.	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	58
Item 4.	Controls and Procedures.	59

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings.	60
Item 1A.	Risk Factors.	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	73
Item 6.	Exhibits.	73

SIGNATURES		75



	Rebates and Chargebacks			Product Returns			Other Sales Deductions			Total
Balance as of December 29, 2017	$	327.4		$	34.5		$	14.7		$	376.6
Provisions	1,644.5			32.0			47.5			1,724.0
Payments or credits	(1,623.9		)	(30.5		)	(47.2		)	(1,701.6		)
Balance as of September 28, 2018	$	348.0		$	36.0		$	15.0		$	399.0

Balance as of December 28, 2018	$	354.3		$	34.0		$	17.1		$	405.4
Provisions	1,772.9			18.8			50.7			1,842.4
Payments or credits	(1,844.4		)	(22.9		)	(41.2		)	(1,908.5		)
Balance as of September 27, 2019	$	282.8		$	29.9		$	26.6		$	339.3



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


•	Specialty Brands includes innovative specialty pharmaceutical brands (inclusive of Amitiza^® (lubiprostone) ("Amitiza"); and


•	Specialty Generics includes niche specialty generic drugs and active pharmaceutical ingredients ("API(s)").



Remainder of Fiscal 2019	$	44.6
Fiscal 2020	168.3
Fiscal 2021	72.4
Fiscal 2022	16.5
Thereafter	6.2



	September 27, 2019
Carrying amounts of major classes of assets included as held for sale
Accounts receivable	$	15.6
Inventories	14.7
Property, plant and equipment, net	103.4
Intangible assets, net	14.5
Other current and non-current assets	27.7
Total assets classified as held for sale on the balance sheet	$	175.9
Carrying amounts of major classes of liabilities included as held for sale
Accounts payable	$	9.9
Other current and non-current liabilities	45.9
Total liabilities classified as held for sale on the balance sheet	$	55.8



	2018 Mallinckrodt Program			2016 Mallinckrodt Program			Acquisition Programs			Total
Balance as of December 28, 2018	$	2.2		$	61.0		$	7.8		$	71.0
Charges	10.4			3.1			—			13.5
Changes in estimate	(1.1		)	(0.4		)	(0.8		)	(2.3		)
Cash payments	(6.9		)	(12.3		)	(1.9		)	(21.1		)
Reclassifications ⁽¹⁾	—			(5.0		)	(4.3		)	(9.3		)
Currency translation	—			(1.7		)	—			(1.7		)
Balance as of September 27, 2019	$	4.6		$	44.7		$	0.8		$	50.1


(1)	Represents the reclassification of lease liabilities, net to lease liabilities and lease assets, which are reflected within other liabilities and other assets on the unaudited condensed consolidated balance sheet, due to the adoption of ASU 2016-02.



	2018 Mallinckrodt Program		2016 Mallinckrodt Program
Specialty Brands	$	3.0	$	82.2
Specialty Generics	9.3		14.6
Corporate	2.2		28.1
	$	14.5	$	124.9



	September 27, 2019		December 28, 2018
Raw materials and supplies	$	56.6	$	69.2
Work in process	176.6		167.6
Finished goods	92.3		85.5
	$	325.5	$	322.3



1.	Background and Basis of Presentation



2.	Recently Issued Accounting Standards



4.	Divestitures



6.	Income Taxes



	September 27, 2019			December 28, 2018
Property, plant and equipment, gross	$	1,880.9		$	1,936.2
Less: accumulated depreciation	(986.2		)	(954.2		)
Property, plant and equipment, net	$	894.7		$	982.0



	September 27, 2019
Other assets	$	84.7

Accrued and other current liabilities	$	18.8
Other liabilities	72.1
Total lease liabilities	$	90.9



	September 27, 2019
Weighted-average remaining lease term (in years) - operating lease	7.5
Weighted-average discount rate - operating leases	3.8	%



Remainder of Fiscal 2019	$	5.7
Fiscal 2020	21.6
Fiscal 2021	16.7
Fiscal 2022	12.6
Fiscal 2023	11.7
Thereafter	36.7
Total lease payments	105.0
Less: Interest	(14.1		)
Present value of lease liabilities	$	90.9



	Nine Months Ended
	September 27, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	17.1
Lease assets obtained in exchange for lease obligations:
Operating leases	7.7



	September 27, 2019				December 28, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable:
Completed technology	$	10,456.9	$	3,621.0	$	10,467.9	$	2,980.6
License agreements	120.1		73.1		120.1		70.1
Trademarks	77.7		19.3		81.9		18.1
Customer relationships	—		—		27.5		14.1
Total	$	10,654.7	$	3,713.4	$	10,697.4	$	3,082.9
Non-Amortizable:
Trademarks	$	35.0			$	35.0
In-process research and development	519.8				633.3
Total	$	554.8			$	668.3



Remainder of Fiscal 2019	$	203.6
Fiscal 2020	754.2
Fiscal 2021	657.6
Fiscal 2022	585.1
Fiscal 2023	581.1



	September 27, 2019				December 28, 2018
	Principal		Unamortized Discount and Debt Issuance Costs		Principal		Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
4.875% Senior Notes due April 2020	$	698.0	$	1.3	$	—	$	—
Term loan due September 2024	15.6		0.2		16.4		0.2
Term loan due February 2025	4.1		0.1		6.0		0.1
Other	—		—		0.3		—
Total current debt	717.7		1.6		22.7		0.3
Long-term debt:
4.875% Senior Notes due April 2020	—		—		700.0		3.2
Variable-rate receivable securitization due July 2020	—		—		250.0		0.4
9.50% debentures due May 2022	10.4		—		10.4		—
5.75% Senior Notes due August 2022	663.2		4.4		835.2		7.0
8.00% debentures due March 2023	4.4		—		4.4		—
4.75% Senior Notes due April 2023	350.1		2.0		500.2		3.5
5.625% Senior Notes due October 2023	659.4		6.0		731.4		8.0
Term loan due September 2024	1,509.1		16.4		1,597.4		19.8
Term loan due February 2025	400.5		6.4		591.0		10.7
5.50% Senior Notes due April 2025	596.1		5.9		692.1		7.7
Revolving credit facility	900.0		3.4		220.0		4.5
Other	—		—		1.9		—
Total long-term debt	5,093.2		44.5		6,134.0		64.8
Total debt	$	5,810.9	$	46.1	$	6,156.7	$	65.1



	Applicable interest rate		Outstanding borrowings
Term loan due September 2024	5.08	%	$	1,524.7
Term loan due February 2025	5.18	%	404.6
Revolving credit facility	4.52	%	900.0



	Currency Translation			Unrecognized Loss on Derivatives			Unrecognized Gain (Loss) on Benefit Plans			Accumulated Other Comprehensive Loss
Balance as of December 28, 2018	$	(20.4	)	$	(4.0	)	$	0.1		$	(24.3	)
Impact of accounting standard adoptions	—			—			0.5			0.5
Other comprehensive income before reclassifications	1.6			—			0.2			1.8
Amounts reclassified from accumulated other comprehensive loss	—			1.0			(1.1		)	(0.1		)
Net current period other comprehensive income (loss)	1.6			1.0			(0.9		)	1.7
Balance as of September 27, 2019	$	(18.8	)	$	(3.0	)	$	(0.3	)	$	(22.1	)



	Currency Translation			Unrecognized Loss on Derivatives			Unrecognized Loss on Benefit Plans			Accumulated Other Comprehensive Loss
Balance as of December 29, 2017	$	(8.2	)	$	(4.7	)	$	(1.5	)	$	(14.4	)
Other comprehensive (loss) income before reclassifications	(4.1		)	—			4.3			0.2
Amounts reclassified from accumulated other comprehensive loss	—			0.7			(5.2		)	(4.5		)
Net current period other comprehensive (loss) income	(4.1		)	0.7			(0.9		)	(4.3		)
Balance as of September 28, 2018	$	(12.3	)	$	(4.0	)	$	(2.4	)	$	(18.7	)



	September 27, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Debt and equity securities held in rabbi trusts	$	35.7	$	25.9	$	9.8	$	—
Equity securities	11.4		11.4		—		—
	$	47.1	$	37.3	$	9.8	$	—

Liabilities:
Deferred compensation liabilities	$	37.3	$	—	$	37.3	$	—
Contingent consideration and acquired contingent liabilities	105.4		—		—		105.4
	$	142.7	$	—	$	37.3	$	105.4



Balance as of December 28, 2018	$	151.4
Payments	(25.0		)
Accretion expense	2.5
Fair value adjustments	(23.5		)
Balance as of September 27, 2019	$	105.4



	September 27, 2019				December 28, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Level 1:
4.875% Senior Notes due April 2020	$	698.0	$	457.9	$	700.0	$	676.6
Variable-rate receivable securitization due July 2020	—		—		250.0		250.0
5.75% Senior Notes due August 2022	663.2		250.3		835.2		713.6
4.75% Senior Notes due April 2023	350.1		99.8		500.2		336.7
5.625% Senior Notes due October 2023	659.4		217.9		731.4		557.0
5.50% Senior Notes due April 2025	596.1		179.2		692.1		479.1
Revolving credit facility	900.0		900.0		220.0		220.0
Level 2:
9.50% debentures due May 2022	10.4		5.1		10.4		9.7
8.00% debentures due March 2023	4.4		1.6		4.4		3.8
Term loan due September 2024	1,524.7		1,136.9		1,613.8		1,472.4
Term loan due February 2025	404.6		300.9		597.0		548.0
Level 3:
Other	—		—		2.2		2.2
Total debt	$	5,810.9	$	3,549.6	$	6,156.7	$	5,269.1



	September 27, 2019		December 28, 2018
AmerisourceBergen Corporation	27.6	%	25.7	%
McKesson Corporation	14.1	%	21.9	%
CuraScript, Inc.	10.3	%	13.1	%


(1)	Includes administration expenses and certain compensation, legal, environmental and other costs not charged to the Company's reportable segments.


(2)	Represents costs incurred related to the separation of the Company's Specialty Generics segment, inclusive of costs related to the suspended spin-off of that business and rebranding costs associated with the Specialty Brands ongoing transformation, all of which are included in SG&A.


(3)	Represents R&D expense incurred related to an upfront payment made to Silence in connection with the license and collaboration agreement entered into in July 2019. Refer to Note 15 for further details.


(1)	Amitiza consists of both product net sales and royalties. Refer to Note 3 for further details on Amitiza's revenues.



	Mallinckrodt plc		Mallinckrodt International Finance S.A.		Other Subsidiaries		Eliminations			Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	0.7	$	64.5	$	433.6	$	—		$	498.8
Accounts receivable, net	—		—		538.8		—			538.8
Inventories	—		—		325.5		—			325.5
Prepaid expenses and other current assets	11.8		0.2		110.2		—			122.2
Assets held for sale	—		—		175.9		—			175.9
Intercompany receivables	128.2		29.2		5,980.2		(6,137.6		)	—
Total current assets	140.7		93.9		7,564.2		(6,137.6		)	1,661.2
Property, plant and equipment, net	—		—		894.7		—			894.7
Intangible assets, net	—		—		7,496.1		—			7,496.1
Investment in subsidiaries	2,684.4		15,633.9		3,877.0		(22,195.3		)	—
Intercompany loans receivable	447.9		—		2,709.8		(3,157.7		)	—
Other assets	—		—		304.1		—			304.1
Total Assets	$	3,273.0	$	15,727.8	$	22,845.9	$	(31,490.6	)	$	10,356.1

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	—	$	696.7	$	19.4	$	—		$	716.1
Accounts payable	0.1		—		100.8		—			100.9
Accrued payroll and payroll-related costs	—		—		83.7		—			83.7
Accrued interest	—		8.1		82.8		—			90.9
Accrued and other current liabilities	0.8		0.2		505.5		—			506.5
Liabilities held for sale	—		—		55.8		—			55.8
Intercompany payables	191.7		5,732.8		213.1		(6,137.6		)	—
Total current liabilities	192.6		6,437.8		1,061.1		(6,137.6		)	1,553.9
Long-term debt	—		2,250.5		2,798.2		—			5,048.7
Pension and postretirement benefits	—		—		58.6		—			58.6
Environmental liabilities	—		—		60.3		—			60.3
Deferred income taxes	—		—		22.0		—			22.0
Other income tax liabilities	—		—		253.5		—			253.5
Intercompany loans payable	—		3,157.7		—		(3,157.7		)	—
Other liabilities	—		4.8		273.9		—			278.7
Total Liabilities	192.6		11,850.8		4,527.6		(9,295.3		)	7,275.7
Shareholders' Equity	3,080.4		3,877.0		18,318.3		(22,195.3		)	3,080.4
Total Liabilities and Shareholders' Equity	$	3,273.0	$	15,727.8	$	22,845.9	$	(31,490.6	)	$	10,356.1